Motorola, which is being acquired by Lenovo but is at present still owned by the search giant Google, has set the price to compete directly with smartphones from home-grown brands such as Micromax and Karbonn.

“People often spend a month’s or more salary to buy their smartphone," Charlie Tritschler, senior vice-president of products at Motorola told the Guardian. "We’ve made the Moto E almost 40% less expensive than the Moto G, so for people on a budget that will make the difference.”

Delhi-based Neil Shah of the analysis company Counterpoint Research, said on Twitter the Moto E "adds further fuel to the fire in already heated-up sub-US$100 wholesale smartphones. [The] quality engineering and brand will favour Motorola."

Motorola hopes that the Moto E can continue the momentum that its last budget offering, the Moto G, generated in developing markets like India. The Moto G was launched in February in India, also sold only through Flipkart, at Rs 12,499. Its allocation of 20,000 phones sold out within hours of its debut. Indian user reviews of the Moto G on Flipkart gave it an average rating of 4.6 out of 5; most of the negative comments related to supply shortages rather than the smartphone itself.

The Moto G was the 12th best-selling smartphone in India in the first quarter of 2014, behind devices from Samsung, China's ZTE and Nokia. A total of 247,000 of the phones were sold, despite only being on sale for two of the three months, according to data from IDC. The Moto G was Motorola's first smartphone launched in India for two years, but was a “very strong competitor in the midrange at a very attractive price”, according to Francisco Jeronimo, a research director for IDC.

‘Looking for durability’

Motorola Moto E for India Photograph: Motorola

The Moto E runs the latest version of Google’s Android software and has a 4.3in display which the company says is the “sharpest in class”, a 5-megapixel camera and claims an all-day battery life. It also has dual SIM slots – a key feature for the Indian market – along with 4GB of built-in storage and a microSD card slot which can be used to add as much as 32GB of storage for movies, music and photos. The Moto E has 1GB of RAM, double that of most phones have in the sub-Rs 12,000 category.

“What people, especially in emerging markets, look for in a phone is durability,” said Tritschler. “With Moto E there are some things we’re doing which you just don’t see in this tier of product, like Gorilla Glass 3 to protect the screen from scratches and breaking with an anti-smudge coating. We’ve also included the same splash-proof P2i nano coating of the Moto G, as well as an all-day battery, so you don’t have to worry about recharging the phone.”

Motorola has been working on the phone for two years, said Tritschler. Its aim has been to cut the cost of processes – such as reaching the market – without compromising device quality, so that it can “disrupt” the budget smartphone market. The Moto G succeeded in carving out a new segment of the market for Motorola, especially in India and the UK, where it propelled Motorola to a 6% marketshare from practically zero and became its best selling smartphone ever.

The Moto E has the same 5-megapixel camera as the Moto G. Photograph: Motorola

Tritschler said: “One of the things we really focused on first for Moto G, but even more so for Moto E, is to design the phone to be very low cost from a construction perspective; how it's built on the line, from a warranty perspective, all the things which really drive the cost of the phone. We architected that into the product; you can’t just cut the price.

“For India, for instance, we decided to go online to keep the cost low to the consumer. Traditionally if we went in through national and local distribution, by the time it gets to the user our exceptional phone isn’t so exceptionally priced anymore."

As with the Moto G, Motorola is guaranteeing that the Moto E will receive an upgrade to the next version of Android – which most other smartphones in its class do not. Motorola is also using a version of the Android software without the modifications typically made by other manufacturers like Samsung and HTC, which are often considered to slow the performance of cheaper smartphones.

Motorola will guarantee software updates to the next version of Android. Photograph: Motorola

India has a population of around 1.2 billion, of which about 13% or 156 million people owned a smartphone by the end of 2013, according to the analysis company MediaCells. It forecasts that smartphone penetration in India will rise to 30% by the end of 2014, with 224m sales, making it the second biggest market in the world for smartphones, ahead of the US but behind China. Of those sales, 207m smartphones are expected to be to new users, making it the second largest market after China for first-time smartphone buyers, while developed nations like the UK and US approach smartphone saturation.

“Moto E is the phone for folks who would like to have a smartphone but just can’t afford it," said Tritschler. "That’s our biggest market, people who have been on the edge for a while but just didn’t think they could afford one. Now they’ll have a product that offers a great smartphone experience that allows them to shift off a feature phone."